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Prominent Analyst ‘Flips,’ But Not That Much

Sat., Oct. 12, 1996

Much - maybe too much - is being made in the investment world about the fact that Morgan Stanley investment strategist Byron Wien “flipped” from his negative opinion on the stock market last Friday and now expects a 10 percent gain in stock prices in the next few months.

Wien has an enviable track record for accurate market predictions as well as forecasts on a host of economic and political matters. In April, when the Dow Jones industrial average was about 5570, Wien predicted a 1,000-point drop. Last Friday, he amended that view to say if interest rates stayed low, stock prices can go higher. But it would be wrong to infer that Wien has turned bullish beyond the next few months.

Speaking to business journalists at a seminar in suburban Milwaukee sponsored by Strong Funds and Northwestern University’s Medill School of Journalism, Wien said any gains that might be in the cards for stocks in the next month likely will be surrendered next year.

“There is a bear market looming out there,” he said. “Bear markets are built out of excessive greed and enthusiasm.”

Wien said there are signs that the public’s ability to dump extraordinary amounts of cash into equity mutual funds may have peaked.

New Nasdaq rules explained

The Nasdaq Stock Market has published a new brochure that helps explain how investors can get the best prices on Nasdaq-listed stocks, based on new rules approved by the U.S. Securities and Exchange Commission.

For a free copy of the brochure, call 1-800-369-5848 any time and leave a message.

Nasdaq also has expanded its World Wide Web site to include a detailed, plain-English explanation of the rules changes, as well as more direct links to computer sites offered by Nasdaq-listed companies.

Here is the Internet address: Barbara Roper, director of investor protection for the Consumer Federation of America, said the steps will benefit small investors.

“Nasdaq deserves particular credit for the substantial efforts it is undertaking to get the word out about the SEC’s new limit-order rules and what they mean for average investors.”

IRA choices broad

IRAs, or individual retirement accounts, are not investments. They are vehicles through which you invest.

Except for some restrictions - for example, you cannot invest in a life-insurance policy in an IRA or in collectibles other than specific gold and silver coins minted in the United States - the choice of investments is very broad and up to you.

You could invest in the riskiest of stocks, for instance, or in bonds or mutual funds or Treasury securities or certificates of deposit, the same as you could outside an IRA. You can set up an IRA through a bank, brokerage firm, mutual fund, insurance company or other financial institution.

The advantage of IRAs is that, depending on your circumstance, you may be able to claim an immediate tax deduction on the money you put in. And you always get to defer taxes on the money your money makes, even if your contributions are not tax-deductible.

Stock dividends untaxed

A stock dividend is a distribution of the company’s earnings that is made in the form of additional shares of stock rather than cash.

While cash dividends are taxed as income the year they are paid, stock dividends are not, unless you had the option of receiving a cash dividend instead.

The stock dividend merely increases the number of shares owned by the stockholder. These shares are subject to capital-gains tax when they are sold. To figure the gain, subtract your total original purchase price from the sales price. The difference is your profit, and that’s the amount on which you pay the tax.

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